Good morning, everyone. Thank you for participating in our Earnings Call for 2Q 2025. With me, I have Salazar, our CFO, and Victoria, our IRO. The agenda for today: I'm going to start off with the highlights for 2Q, and then I'll explain some information about our new strategic plan for the company. Next, I'll hand over to Salazar, who will talk about the financial results for 2Q, and then we'll open up for Q&A. The earnings of 2Q were very much in line with what we've expected. Once again, Centauro presented consistent growth in both channels, which enabled us to end 2Q with record revenue for the period, and a highlight to gross margin, which shows that it was greater year-over-year. Fisia is once again growing in all channels, and here I'd like to highlight the wholesale channel, which grew approximately 4%.
We were already informing that we expected the recovery of the channel in the second half of the year, but with the results of 2Q, that really gives us the trust that all the initiatives that we're using are working and shows us that we are on the right path. After having presented an increase of 40% in net income in 1Q, once again, we have an increase of 19%, even though there's pressure to the EBITDA as a result of the U.S. dollar at the beginning of the strategic planning. We continue with healthy leverage, very much driven by the decrease by 33.1% of net debt, and to decrease the cost of debt and financial results as a result of that. This month, we issue new debentures at a very appealing cost of the CDI + 0.85%.
This quarter also marked the beginning of the implementation of the new strategic planning for the group. All of you have followed the deleveraging plan that the company executed across 2023 and 2024. It was a very successful plan and enabled us to end last year at a very comfortable level of leverage of 0.38. Now that everything's organized and we have a very comfortable cash position, we believe that it's time for the company to once again go into a cycle of growth. Across the first quarter, we developed a strategic plan to unlock the growth of our two main business units, Centauro and Fisia. For Centauro, the strategic plan and the investments will be fundamentally directed to improve our consumers' purchasing experience in brick-and-mortar stores and the digital channel. In brick-and-mortar stores, we want to improve our service to become more technical and customized.
We want to offer a more comprehensive and assertive assortment. We will evolve how we showcase our product and brands in the stores, and we will invest a lot in improvements and refits overall in the older stores. In digital, after migrating the technological stack last year, we will continue to evolve the technology platform. We have a robust roadmap of new functionalities. We will go deeper into our multi-channel strategy. Last year, we launched a very significant aspect with it just changed everything. Any product, 1P or 3P, bought on the website can be returned at the store. That is the idea. Any and all products that we offer on the website can be picked up or returned at our stores. Finally, we want to improve how we showcase our products on the digital channel as well. The truth is that we've already had significant advances in these fronts.
To offer a more comprehensive and assertive assortment with more efficient distribution, we've highly reinforced the commercial structure at Centauro. It was focused on one single management division, and now we have directors that are focused on the main categories, such as shoewear, clothing, and soccer, and martial arts, basketball. Now we have a director focused on our own brands and licensed brands, and also reinforced the stores. In terms of employees, we've hired on average four new employees per store. To support that expansion, recruitment, selection, and the technical qualifications of these people, we created an original area that's under a new Director of Human Resources. For these refits and improvements, we've reinforced engineering and architecture. We brought in a Senior Director from the market and have increased the number of employees in that department as well.
To present the new strategic plan and engage leadership, last month, we held the biggest sales convention in Centauro history. We brought together approximately 600 employees, including the 227 managers of the stores across the entire country. At Fisia, which is also under new leadership, we've developed a strategic plan that's very much in line with the global Nike strategy that they've been communicating since the beginning of the year. The main pillars are recovery in the wholesale channel, increase our presence in soccer, implement the new running strategy, maintain the leadership in lifestyle, now with an adjusted demand of the classic silhouettes that we call Big 3. We continue to focus on improving the efficiency of inventory and expanding the presence of our NDIS stores. Those are full-price stores where we have the new brand collections. For the recovery in wholesale, actually, we started last year.
We started many initiatives to improve the service level of the channels, meaning how we service our customers. Last year, we reinforced the commercial team. We strongly evolved the portal, which is the platform where the customers place their orders. We resumed the events where we present brand strategy and collections. We've made important changes to product segmentation so that it's more in line with our customer needs. I believe that the most important initiative is that we lowered the markdowns a lot that we were using in own channels. For 2025, we want to make that program even stronger. We strengthened the merchandising team so the collections will be more in line with customer needs. We've increased the commercial team. We brought in a manager that's focused in serving our soccer customers, very much in line with the soccer strategy. I'll talk about that later.
We dedicated a technology team to expedite the evolution of that portal. We are working to present an exclusive showroom at the end of the year to present the collections to our customers. In the beginning of the year, Nike reset the running strategy. From now on, Nike is organizing their portfolio, all their products, under three franchises that have very well-defined attributes depending on the use occasion. There's Pegasus, which is responsive cushioning. We have Structure, cushioning with support and stability, and Vomero for maximum cushioning for comfort and long distances. We're very much in line with the success of this new strategy, given the launch of the new Vomero style that presented 48%, or, excuse me, 46% growth year-over-year. To increase our presence in soccer, we've also reinforced the sports marketing department.
They're responsible for prospecting new clubs, new athletes, and also to maintain the relationship with these clubs. We've recently renewed our sponsorship contract with Corinthians Club for 10 years, and we're very confident that next year we'll have new partnership contracts with relevant clubs in series A. We presented the new uniforms for the women's national team, and for 2026, Nike will still be the official sponsor of the Brazilian national team for the World Cup. Now, I'd like to hand over to José Salazar, who will give us the details about the financial results for 2Q 2025.
Thank you, Gustavo. Thank you, Victoria. Now, I'll go over the main points for the financial results for this quarter. I may be a bit repetitive with what Gustavo has already mentioned because deep down, everything that's happening is already a result of the planning that has been put into place since the second quarter this year. In Centauro, I would like to highlight brick-and-mortar stores. You can see solid growth of 9.4%. Most importantly, what shows us that we are on the right path is the 8% growth in units sold. That's part of the diagnosis that we did last year. We can see that the actions that were taken, as Gustavo mentioned, of a more senior leadership, more care in sales and customer service, we can see these results as a result of that.
Another important point is that e-commerce, also mentioned by Gustavo, and the focus that was given in customer experience with the IT teams looking at that platform and the people that came in to improve allocation, that also improved and gave us expressive results of 22.3% in the growth of 1P. A result of the technological evolution of the platforms is that we have almost 60% of sales by app. That goes to show that we have a huge evolution in the quality of services provided, in the improvement of conversion, which leads to the positive results in digital. It's also important to mention that we are increasing margin in both channels. With everything that's being done, we've been able to bring on this growth and a margin increase. Now, moving on to Fisia, I believe that the main point here is growth.
We're coming from a base of comparison, especially when we consider the brick-and-mortar channels, direct channels, a moment where we've been recovering price, reducing discounts, and yet we're still able to grow in these two channels: 5.1% in digital and [8.2%] in digital and in brick-and-mortar, excuse me, considering the aspect of the discounts. The positive side of not giving discounts is that we make it better for our wholesale customers to buy. They can feel more secure. What came even before we expected is a recovery of the wholesale channel because we're balancing out the prices amongst the different channels. That's a very important aspect, in addition to all the other actions that Gustavo mentioned, to improve the relationship with our customers.
I'm not going to repeat all of that, but all of that, plus better adjusted prices, leads to a better expectation from the wholesale channel for the future. Obviously, at Fisia, we have an FX impact at this time, especially in the wholesale channel. However, in a way, we were able to offset the effect on EBITDA, improving the net margin of the company. We have more tax incentives in brick-and-mortar stores, and that tax incentive doesn't pay income tax. That makes up the net income, even though we have that impact on expenses and gross margin. In terms of the execution of the plan to mitigate the impacts of FX in the short period with the tax incentives, we are moving well.
I'd like to remind you that for 3Q and 4Q, we've already migrated wholesale to distribute, and that tax incentive will start in August, or we'll actually see that in the results in August as well. It goes through Extrema. We're moving through that scenario that we've been talking about, which is to mitigate almost all the impacts of FX and gross margin and expenses with more tax incentives, and which one of them has a smaller rate. That was a very positive aspect at Fisia as well, in addition to the results of wholesale that we're seeing before we expected. We expected that recovery in 3Q and 4Q. Now, moving on to SG&A, or actually, sorry, revenues. You can see the company growing 6% in the quarter. You can see the two business units growing.
We can see Centauro, as mentioned before, increasing the number of items sold at this point, especially in footwear and apparel. Even though winter impacts less than other retails, for us, we also had a positive impact, and we consolidate the recovery of wholesale. We're consolidating our expectation that we would recover wholesale with growth results in 2Q. In gross profit, in addition to offsetting the FX impact with the tax incentives that I mentioned before, we also have a positive effect of the Centauro gross margin helping to offset the drop in the Fisia gross margin resulting from FX. At Centauro, it's up year-over-year, and that also helps to decrease the effect on the consolidated figures of the company when we have a worse gross margin at Fisia. The path that we're on seems to be very much in line with what we had planned.
It seems like we're on the right path as well. In SG&A, we, in fact, have an impact at this time of the investments that we're making to improve customer experience at Centauro and improve the experience. We have more salespeople at Centauro and more people in products to have a better allocation, so on and so forth. In a way, we can offset these investments that were made, having more action on corporate SG&A. That increase is 0.9 percentage points, and we're working on that to subsidize these investments with more efficiency in corporate expenses so we can reduce that temporary impact as much as we can.
In the future, especially as of 4Q, especially as of next year, when we see that all the initiatives that we have have been more consolidated, we will reap the benefits in the revenues of these initiatives, and therefore, we will have operational leverage. While we're implementing strategy, we've been trying to offset that increase in investments in these initiatives with higher efficiency in corporate expenses. Now, on the next slide, deep down, everything that we're talking about and what Gustavo has also explained, we have a positive result to net income. We have, in fact, we do have an impact, especially resulting from the exchange rate to the EBITDA. This impact is partially offset by the higher tax incentive that we've been generating and also by the lower effective rate.
Even though EBITDA is lower, when we look at the net margin of the company, it increased 0.5 percentage points, and net income is up 19%. Temporarily as well, because if we think of the long term, obviously, we'll have a possibility of being able to adjust the prices of collections, and the result of the tax incentives would be for the company, so to speak. In the short term, we've been able to manage that trade-off well between gross margin, EBITDA, and net margin. I lose a little from the net margin and EBITDA, but especially in this quarter, we were able to have some growth year-over-year with all of the initiatives that we've been implementing.
Once again, up to the time being, we've been satisfactorily executing the operational and strategic plan, as well as the financial plan to mitigate some of the impacts, especially of the exchange rate. Now, on the next slide, the cash flow, which I believe we have very positive news, in my opinion, and the fact that we had operating cash flow for 2Q during a moment where we're planning more aggressive purchases, given everything that's being done at Centauro to grow the number of units sold to grow. We've had a cash flow during that seasonally getting ready for the second half of the year, and a second half of the year where we want to see some initiatives in 4Q that are more consolidated. The fact that we had negative cash flow of BRL 54 million is a result of the strong work that we have in working capital.
In terms of debt, Gustavo mentioned we paid BRL 504 million in debt. All of this was completely refinanced in July, as we had already disclosed. For dividends, with everything that we've been doing, we were able to pay more dividends year-over-year, doing all of that and maintaining net debt absolutely in control. We go from 1.06 x in 2Q to 0.68 x in 2Q5. The change quarter over quarter is practically nothing, 0.61x- 0.68 x. We've been able to do that, all of these plans and investments, and maintaining indebtedness absolutely under control, capital structure that's absolutely under control. All of this is a result of the work that we've been doing in working capital and the financial cycle. Obviously, at this time, we've been investing more in products, especially at Centauro. Now that we're investing more in product, inventory will increase.
However, accounts payable also increases to offset that. When accounts payable have to be paid, we will imagine that everything will be matched, which is usually 4Q first half of 2026. We imagine that we would have been financed by higher sales than what we already had. Our cash situation will remain absolutely stable. I believe that that's what I had to say in terms of earnings. Now, we'll move over to Q&A. Gustavo and myself are available to answer your questions. That's it. Thank you for attending.
Now, we will begin the Q&A session. To ask a question, please click on raise your hand. If your question is answered, you can leave the queue by clicking on lower your hand. First question is from Rodrigo Gastim from Itaú BBA.
Good morning, everyone. Good morning, Gustavo and Salazar. I have two questions. First of all, top line. Top line stood out in yesterday's figures a bit better than what we had. More importantly, is thinking about moving forward. In 3Q, you have same store comparison that's negative, Centauro as well. Even in the macro scenario that's harder, we've seen this in other companies reporting that should we expect top-line speeding up, not just because of the basics, but also the macro aspect. That's top-line moving forward. The second, you had a negative impact on gross margin because of FX and G&A because of investment. Plus stores, and you were talking about that, that's happening. At the end of the day, we see an adjusted EBITDA dropping year-over-year because of the investments. How should, when should BT recover? When you look at the investment plan that you have, to hire, you need our expectation of your results in stores. When do you see an inflection of the dynamic of growing EBITDA/profit? Those are my two questions. Thank you.
Thank you for your question, Gastim. I'm going to answer both at once, then I'll hand over to Salazar if he wants to add anything to that. As in any strategic plan that's focusing on investment, first of all, you have the investment per se, then after a while, we start to capture an increment in sales. Since the start, we imagined that Q2 and Q3 would be quarters of transition. That's when we really start to capture the results based on the last quarter of this year, and especially next year, as it has a very relevant sports calendar. We want to get there with an adjusted operation, well-dimensioned with all the activities that are well-dimensioned to capture this next year.
That said, we're very satisfied with the results and measures that we've been taking so far. Wholesale presented growth even before that we signaled. We remain confident that we will expedite the recovery in the second half. We maintain the expectation of two quarters of transition, but we are also confident that the initiatives are working as we imagined. Salazar, would you like to add to that?
Thank you. Thank you for taking my question.
Next question is from Rodrigo Rached from, sorry, Felipe Rached from Goldman Sachs. Go ahead, Felipe.
Hi, everyone. Thank you for taking my question. I'd like to explore the gross margin dynamic in Fisia. We know well about FX. I'd like to hear about higher competition in the wholesale category. Is there any specific category where you see stronger competition? Any details that you can give us about the categories that are outperforming in Fisia, that would be great. Thank you.
Hi, Felipe. Thank you for your question. Let me see if I understood correctly. The adjustment in sale in a specific competition in a given category. What's the second one?
Just to understand, Gustavo, if there are any categories in Fisia that perform better or worse in terms of sales, but also gross margin, especially in the wholesale channel.
Okay, great. We're highly focusing right now on the running categories and soccer. What we've seen is that the new lines are showing an encouraging appeal moving forward. In lifestyle, we're still the leaders. I don't think that there are any categories that we could specifically say that we have tighter competition.
As we mentioned before, we guaranteed that at this time, the tax incentives would subsidize the prices so we can be more competitive and maintain the sales in the direct channels at full price. We've been very successful in that. We should see the recovery of the wholesale channel in this quarter, and we are very confident that will continue in upcoming quarters, especially in the second half of this year. Going back to your question, we do not see a specific category that I could highlight where the competition is tougher.
Just to add to that, Felipe, when we talked about tougher competition, what we were imagining is that when you have an FX effect, not everyone is able to respond as we did in terms of being relatively sophisticated, maybe. I wouldn't say that, but to quickly implement these tax incentives.
We believed that it would help us, that the FX would impact the competition, and we could have a higher price resulting from that. That still hasn't happened. That's why we talked about more competitiveness because we might see the competition moving around and having to adjust prices, but that didn't really happen in the second quarter. Another thing that I would like to add as a result of Gustavo's response, as of May, if I'm not mistaken, we have a product that's solely for wholesale that could boost the orders, which is a running device at a more competitive cost. We call that P1. Up to the first quarter, half of the second quarter, we still didn't have that product available. Now we do. I think that's going to help. That will help wholesale in 3Q and 4Q. As the competition, the FX rates affect everyone. We were able to mitigate the FX effect with more efficient tax planning. However, we expect or believe or are rooting for price increases because of the FX from the competition. We can do that as well. The tax incentive would be for the company. Just to add to Gustavo's answer.
Thank you, Salazar and Gustavo, very clear.
Next question is from Danni Eiger from XP.
Good morning, everyone. Thank you for taking my question. I have a question about the investments that you made, especially at Centauro. We saw a lot of hires. I know that it has to do with getting ready for next year. First of all, about reinforcing headcount in stores, just to understand the context, is it because you want to separate the salespeople into categories as a result of their specialties? Is that it? Some stores had few employees and you wanted more. Could you give us some more flavor of the context of that investment? That would be great. The second one is if you believe that there are still any investments to be made in Centauro and Fisia that we haven't seen in this quarter yet. Thank you.
Thank you for your question. Let me take a step back first. Our store is almost as if it were two stores in one. On the right side, you see a full wall of footwear, and you have commissioned salespeople to sell those products. On the right is self-service. This is how we've divided our investments. We significantly reinforce salespeople in this quarter, but the investment is basically in the variable cost. We follow the average sales per salesperson to guarantee that the marginal ROI is positive.
We particularly invested more in the stores that we call low power, and we found good results. We believe that the low power stores, so you're adjusting your headcount by looking at the sales per area. We believe that the low power stores were undersized. It was very important to be conservative during the deleverage period, but we decided to conduct a diagnosis and pretty much look at the individual performance of each store to see if there was an opportunity to increase the number of employees in the high power stores or if there are any opportunities even in the low power stores. Increasing the number of employees in sales is very important. We analyze cost over revenue to make sure that we get things right.
On the left side of the store or the right side in self-service, the way we size that is looking at the time and movement of the employees to see the percentage of time that these employees were dedicated to customers. We want to make the service more technical and customized. It's not going to be exactly a one-on-one thing, but we want the employees from self-service to dedicate more time to servicing customers. The target is on a certain percentage of time dedicated to customers, and we reinforce the number of employees there as well. Here, we're following the increase in conversion. Many variables influence the results at the same time. That's how we decided to distribute the investments in store. It's also worth noting that these investments are highly reversible. We can invest and follow the metrics to see if we exaggerated or not.
What I can say right now is that we're very satisfied with the assertiveness of the investments that we've made so far. About the second part of your question, if you should expect higher investments in the second half, even in Fisia or Centauro. To answer your question, one of the pillars that we started and we hadn't seen an impact in the result are the improvements and refits. We spent the second or part of the quarter equipping that, and we'll see some improvements in that in the second half. As of next year, that's when we'll see a significant number of refits that we've seen this year.
To add, Danni, about refits and renovations and improvements, that's pretty much CapEx. We see an increase, we'll see an increase in the second half of the year. That's an investment that goes into CapEx, different than the investments in stores and employees that goes into OpEx. OpEx, the investment was made, it's maintaining that. Obviously, there's always some fine-tuning and small changes to make in a couple of stores, regional ones. I think the big part was already done, the most part. As Gustavo mentioned, we've re-equipped the engineering department, engineering and architecture department, and we can start to implement these improvements and renovations in a faster way.
Great. Thank you for your answers.
Next question is from Vitor Fuziharo from Santander. Vitor, go ahead.
Good morning, everyone. Thank you for taking my questions. I have two. First of all, about the new strategic planning, I'd like to understand how you see a potential impact in the incentives in sales. Do you have any targets for store productivity or sales per square meter? The second one is about Fisia, especially in brick-and-mortar stores, with the price adjustment. Is that something we should see in the second half, or is that a one-off because of seasonality or any other factors? Thank you.
Thank you, Vitor, for your questions. I'd just like to confirm that I understood correctly. The second one is a potential price increase that we have in the direct Fisia channels, and if that represented any seasonal realities or, excuse me, in the second part, if we expect any growth in the top line of Centauro or sales per square meter, is that correct?
Yes, exactly.
Okay, starting off with Centauro, knowing that these investments will have a significant impact in the top line. Going back, I'd like to reiterate, we believe that Q2 and Q3 are transition quarters, and we'll see us capturing that more in the last quarter.
Centauro has been capturing consistently already. In the first half, we grew double digits in both channels in a consolidated manner. We're very confident that these investments will be duly captured, especially as of Q4 this year. At Fisia, the price increases that existed were one-offs. It wasn't really about transferring the price as we did previously. We're not seeing that we would change the strategy. Recovering the wholesale channel is important. There are various aspects there. If you adjust prices in your direct channel, you're going to have an impact in wholesale. If you mark down in the direct channel, you're affecting wholesale. In terms of pricing, we don't expect any changes to the strategic plan.
Okay, thank you.
Next question is from Isabella Lamas from UBS.
Hi, everyone. Good morning. Thank you for taking my question. We have two. About non-recurring events, you had BRL 31 million in organizational restructuring. I'd like to understand, could you give us more flavor about what is considered in that, and if we should expect something in that line for the upcoming quarters? The second one is about what you answered in the previous question about refits and improvements in Centauro. Should we expect still investments of that in the second half? What about the planning of that? How many stores do you see a need for refitting this year? How many for next year? Also, about opening and planning of openings, not just Centauro, but especially for Fisia. About that, about expanding the number of stores. That's it. Thank you.
Hi, thank you for your question. I'll start off by answering the admin reforms. Basically, six, excuse me, six executives have left the company. We changed the CEO. The General Manager at Fisia left the company. The HR Director left. Logistics as well. That was the second level of the company. In addition, we had other changes, smaller, so to speak, in the company, basically based on past results and the work carried out. The board decided to offer a layoff package for these people that participated in building the company up to the time being. In addition to that, specifically, we do not believe that we will have any other kinds of impacts for the future.
Actually, we were very careful because even though the payments of all these contracts of these people, as they had contracts that varied from one to three years, and if your cash will be paid out in one to three years, depending on the situation, we decided to provision these amounts in advance to reflect that in the results all at once. We didn't have to explain in upcoming three years, every single month, the same thing. That's the idea. Approximately 10-1 2 people left the company. Obviously, it's not the math isn't that it's going to be divided by 10 or 12. It's a three-year period, or actually one to three years, depending on how long these people were with us. That's why we created these layoff packages. I'm not sure if that was clear, but I'll hand over for Gustavo to talk about the second part.
The second part is about the refits and improvements and the plan to open new stores. As I mentioned, to explain that better, when we talk about improvements, that's about lighting, signage, traffic area. You don't really have to interrupt the operations of that store. Refit is a bit more invasive. The first thing that's very important to mention is that the refits will not follow what we've been doing so far, which is to take an older generation store and turn it into what we called G5 and close the store 90 days, and we were spending BRL 4,000 per square meter. These refits will be more about a one-off thing and customized according to individual characteristics of these stores. We will have a cost per refit that is going to be much lower than what we've seen so far.
Once again, these refits will be mainly focused on the older stores, older generation stores. This year, we started off with a little over 100 stores that haven't been turned into the G5 model, and we developed a plan so that we could have an intervention in all the older stores. Obviously, this plan will be conducted in about two and a half years. Right now, we're focusing much more on offering engineering and architecture what they need to prepare the track to define what we're going to do during the year. The improvements are pretty much business as usual. In the deleveraging plan, we reduced the number of investments and improvements, but it's business as usual. As of this year, we will invest heavier than what we invested in the previous two years in improvements.
About store openings for this year, as we did in the two previous years, we wanted to be more conservative in opening new stores. As of 2026, we see a very big opportunity to increase our share in NDIS stores, as I mentioned. We don't have a figure yet, but we do have an ambition, a big ambition, to increase the share of NDIS as the ROIC is very good. Regardless of the reality of interest rates next year, it will always make sense to increase the share of NDIS stores.
Very clear. Thank you, Gustavo and Salazar. Have a great day.
The Q&A session is now over. We'd like to hand over to Gustavo for his final remarks.
Okay, everyone, I'd like to thank everyone for their presence. Once again, the interest in our company. I'd like to say that we're very excited with the start of this new growth cycle, and love to see you again during our next earnings call. Thank you.
The SBF Group earnings call is now over. Thank you for your participation. Have a great day.